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Term life insurance plans provide compensation to your family or relevant nominee if you die within the policy tenure. After your demise, a lump sum death benefit is paid to your nominee. While a term plan is great for ensuring the financial protection of your dependents after your death, not all deaths are covered under such policies. Hence, it is prudent to be orderly aware of the terms and conditions of a term insurance plan before investing in it.
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The 8 major death cases that are not covered under term insurance are:
Murder: Under two situations, compensation shall not be given under term life insurance if the policyholder is murdered. These situations are:
Situation 1: If the nominee is a criminal: The insurance company will not settle the claim if it is revealed that the nominee was involved in the policyholder's murder after the relevant investigations. The payout under this plan will only be made if the nominee is innocent of all crimes or if the murder charges are dropped. The insurance company withholds the payout for an indefinite period till the case is resolved in the nominee's favor.
Situation 2: If the policyholder died due to their involvement in any criminal activity. The insurance company will not settle the claim if the policyholder gets murdered due to his/her involvement in a crime defined by the law. Conversely, the nominee will get the payout if the policyholder has a criminal record but dies due to natural uncertainties like medical conditions or accidents.
Death Occurs Under Alcohol Influence: In case the policyholder dies by driving under the influence of any narcotic substance or alcohol, the insurance company will reject the claim. Most insurers do not issue life insurance plans to individuals who consume narcotic substances or drink heavily. If policyholders had not orderly disclosed such habits while investing in their term life insurance policy, the insurance company shall withhold the death benefit. If you are a heavy drinker, you need to provide a correct declaration of history of alcohol consumption in the proposal form during the underwriting stage. This declaration will include the type and quality of alcohol consumed by them. Submitting this declaration beforehand can prevent claim rejection.
Death Caused Due to Heavy Smoking: If you are a smoker, it is important to reveal the habit before investing in the term insurance plan. Smokers have a higher degree of health risk, and many insurance companies add an extra amount or load to the premium for them. Suppose you do not disclose this habit while purchasing the policy. In that case, the insurance company can deny the claim if your demise was caused due to any smoking-associated complication or health condition.
Death Caused by Participating in Hazardous Activities: Death caused due to taking part in any hazardous or adventurous activity is not covered by a term insurance plan. Such activities pose a threat to your life and can lead to fatal accidents. Suppose you commonly participate in adventure sports like hiking, parachuting, paragliding, skydiving, or bike and car racing. In that case, you need to disclose this information at the time of purchasing the policy. Not doing so is a material misrepresentation, and your insurance company is not warranted to honor the claim if your death occurs due to a hazardous activity or sport.
Death Due to Pre-Existing Health Conditions: If you die due to any medical condition that existed during the time of availing of the term life insurance policy, the insurance company will not settle the claim. You need a specific rider to cover pre-existing critical illnesses that can lead to death. Death due to STDs like AIDs or HIV is also not settled by the insurer if a rider does not cover it.
Suicidal Death: Several insurance companies do not provide coverage for suicidal death. Therefore, you need to go through the terms and conditions of these plans properly before investing in them.
In addition to the situations mentioned above, you need to consider what is term insurance and the types of deaths they do not cover, like death due to terrorist attacks and/ or deaths taking place outside the country. Exact details about the exclusions of a plan can be found in its relevant policy document. Therefore, it becomes crucial to acquaint yourself with all the terms and conditions of your policy. You can calculate the premiums applicable for the suitable term plan cover using the term insurance calculator available online.
Many invest in term insurance to be assured that their nominee acquires a lump sum amount if they die within the policy tenure. However, there are many instances under which life insurance policies shall not cover your death. You need to be adequately aware of these situations before purchasing a term insurance policy. Knowing the exclusions will help your family or nominee avoid any confusion during the claim in case your death occurs in any of the situations mentioned above.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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